Scholastic stock initiated with Buy rating by B.Riley on brand strength

B.Riley initiated coverage on Scholastic Corp (SCHL) with a Buy rating and a $37.00 price target, citing the educational publisher's strong brand, diverse IP, and unique school-based distribution channels. The firm projects significant EBITDA growth to $185 million by fiscal year 2027, driven by segment realignment and cost savings, and highlights potential value unlocking from real estate transactions in late 2025, noting the stock trades near tangible book value. This positive outlook follows SCHL's Q4 2025 earnings and revenue exceeding Wall Street expectations, despite a recent decline in regular trading, with the stock currently trading below its estimated fair value.

Analysis

B.Riley has initiated coverage on Scholastic Corp (NASDAQ:SCHL) with a Buy rating and a $37.00 price target, suggesting substantial upside from its current $25.28 price. The firm's positive outlook is predicated on Scholastic's powerful brand, diverse content IP, and unique distribution channels. This is supported by a forecast for improving profitability, with adjusted EBITDA projected to grow from a fiscal 2024 low of $137 million to $185 million by fiscal 2027, driven by a new management team's proactive segment realignment and cost-saving initiatives. The stock's valuation appears compelling, trading near tangible book value with a price-to-book ratio of 0.67, a level B.Riley considers "deep value." This fundamental view is reinforced by Scholastic's recent Q4 2025 earnings report, which surpassed analyst expectations with an EPS of $0.87 (vs. $0.85 estimate) and revenue of $508.3 million (vs. $494.59M estimate), demonstrating resilience despite a recent stock price decline in regular trading. Further upside could be realized from potential real estate transactions in late 2025, which may unlock value trapped on the balance sheet, while a 3.16% dividend yield, maintained for 18 consecutive years, provides a consistent return to shareholders.

Key Decisions for Investors

• Given the new 'Buy' rating, a valuation near tangible book value, and a recent earnings beat, investors could view the current stock price as an attractive entry point, especially considering management's proactive restructuring efforts.
• Monitor the progress of the Education Solutions segment realignment and cost-saving measures, as the successful execution of these initiatives is the primary driver for the projected EBITDA growth to $185 million by FY2027.
• Investors should watch for news flow regarding potential real estate transactions in late 2025, as this is highlighted as a significant, date-specific catalyst that could unlock substantial balance sheet value.
• The combination of a consistent 3.16% dividend yield and a stock trading below its perceived fair value presents a potential value-with-income opportunity, though the recent price decline despite positive news warrants attention to broader market sentiment or sector-specific pressures.